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brownsigns.jpgThe Wall Street credit rating agency Standard & Poor's said today that California is in a better financial position than it has been in years, but it criticized the politicization of state revenue estimates and warned long-term spending commitments could frustrate efforts to pay down debt.

"Overall, we believe the state ... begins its fiscal year in a stronger position than it has in several years," the rating agency said in a report on the first day of the new fiscal year. "Its liquidity and structural budget positions both reflect materially better conditions."

Gov. Jerry Brown signed the main budget bill last week after persuading legislative Democrats to accept his relatively modest revenue estimates. In a concession to lawmakers, however, Brown reduced by about $650 million the amount of money he originally proposed to pay down debt owed schools under Proposition 98, California's school-funding guarantee.

"Standard & Poor's Ratings Services believes the higher-than-expected cash receipts presented the state an opportunity to accelerate its plans for retiring the $26.9 billion in budget liabilities that remain leftover from prior years' deficits," S&P said. "Compared with what the governor recommended in May, however, the final budget agreement moves in the other direction, decelerating somewhat the repayment of a portion (of) these debts."

That Brown and lawmakers could negotiate at all about the amount of tax revenue they expect the state to collect this year troubled S&P. More than half of states rely on independent revenue bodies, the ratings house said, and it criticized the budget process in California for highlighting "what we view as one of the weaker elements of California's fiscal institutions - that of allowing political negotiation to influence the revenue estimates used in the budget."

California's $96.3 billion spending plan includes additional money for the state's welfare-to-work program, college scholarships and dental care for poor adults - with commitments to spend an increasing amount in future years.

S&P expressed concern about revenue volatility. By enacting even a modest expansion of ongoing spending commitments, the agency said, "we detect a softening of resolve when it comes to paying down the internal debts."

The report said, "We believe that by opening the door to new programs while waiting for future (uncertain) revenue to repay some internal debts, the state delays, or jeopardizes altogether, its ability to confront the long-term liabilities."

PHOTO: Assemblyman Bob Blumenfield, D-Woodland Hills, chairman of the Assembly Budget Committee, far left, celebrates after being presented one of the pens that Gov. Jerry Brown, seated, used to sign a copy of the state budget at the Capitol in Sacramento on Thursday, June 27, 2013. Associated Press/ Rich Pedroncelli



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